Mat Heaton, Founder of ActiveRain on what Economist think of the Bailout....
One of the most troubling aspects of the debate going on through the weekend over the proposed bailout bill is not a single independent economist or financial expert has been brought into testify in front of Congress or The Senate. True, they brought in Warren Buffet to testify the financial system was going to collapse without it to their closed door meeting last night. I would argue he's far from independent given he just invested $5B in Goldman Sachs last week (why would he do this is the system was in threat of imminent collapse?), has written nearly $5B in credit default swaps and another $5B in long term put options against the S&P 500.
So what do economists think
Well it's pretty much in synch with what I've been writing here. Almost unanimously they don't believe the bill solves any of the issues either in the credit markets or the broader economy, and in fact believe it will make things worse. The link below is a plea from nearly 200 of the top economists in the US to stop and think about the plan.
http://faculty.chicagogsb.edu/john.cochrane/research/Papers/mortgage_protest.htm
Economist Nouriel Roubini, who's one of the few economists that has correctly predicted these events years ago, offered up this scathing response today.
In it he broke down various government responses to 42 past systematic financial crisis and came to the conclusion
"Thus, the Treasury plan is a disgrace: a bailout of reckless bankers, lenders and investors that provides little direct debt relief to borrowers and financially stressed households and that will come at a very high cost to the US taxpayer. And the plan does nothing to resolve the severe stress in money markets and interbank markets that are now close to a systemic meltdown. It is pathetic that Congress did not consult any of the many professional economists that have presented - many on the RGE Monitor Finance blog forum - alternative plans that were more fair and efficient and less costly ways to resolve this crisis. This is again a case of privatizing the gains and socializing the losses; a bailout and socialism for the rich, the well-connected and Wall Street. And it is a scandal that even Congressional Democrats have fallen for this Treasury scam that does little to resolve the debt burden of millions of distressed home owners."
While the main stream media seems to be portraying this bailout as a done deal this morning, from discussions I've been having this seems to be far from the truth and simply pressure mainly by the administration and democratic leadership (strange bedfellows) to push a bill through before Monday with no time for debate. Thanks to a lot of tireless work by many individual it appears there are several factions in Congress that are now getting a hold of documents and are now actively in contact with some of the independent experts who have been sounding dire warnings about this bill.
No one will debate how dire the situation is for our economy and capital markets right now, but taking the wrong action for the sake of taking action can produce a much worse result. While I've stayed out of any types of politics in the past, I've become very involved with this issue because I truly believe taking the wrong path right now could lead to a destruction of our financial markets for decades.
